Gov. pitches bill to resolve foreclosures

Published 8:59 pm, Wednesday, January 30, 2013

HARTFORD -- Gov. Dannel P. Malloy wants to make sure banks negotiate in good faith when homeowners battling foreclosure try to strike a new deal with their lender.

The governor on Wednesday said too often bank mediators don't have the authority to make a deal when they negotiate with homeowners during a court supervised foreclosure procedure. Banks also send different mediators to different meetings, needlessly prolonging the process, the governor said.

Malloy and state Attorney General George Jepsen said they are submitting a bill to the General Assembly that would require banks to dispatch only mediators who have the authority to enter into a settlement. The banks would face fines and other penalties if they don't comply.

State officials said the foreclosure crisis has not yet abated in Connecticut, noting there were 16,500 foreclosure petitions filed with courts in 2011 and 19,300 in 2012.

"(Foreclosure) can cause significant distress to families," Jepsen said. "Our goal is to help people stay in their homes as long as possible. Homeowners, mortgage holders and neighborhoods all benefit when a properties remain occupied and are not abandoned because of foreclosure."

The bill would streamline the court supervised mediation procedure and speed up the process for removing abandoned or blighted property from foreclosure, Malloy and Jepsen said.

"So let's be very clear. Mediation will take place and the side mediating on behalf of the bank has to have approval to settle the matter. That's not always been the case," Malloy said.

Under state law, mediation is triggered after a foreclosure petition is filed with a court. The homeowner, a court representative and a bank mediator can sit down and try to work out new terms for the mortgage.

Linda Casanova, of Branford, said she knows what it's like to enter into mediation with a bank. After losing her job, Casanova said she faced foreclosure in the fall of 2010.

"Mediation was never a good experience for me. My goal is to keep and afford my home. And I'm still dealing with Bank of America," Casanova said.

Debbie Sargunas, of Thomaston, said she experienced the type of tactics the governor described during a year of mediation with her bank. She fell behind on mortgage payments in 2009.

"If this bill was in place I believe our problems would have been resolved sooner," said Sargunas, who eventually settled with her bank.

"There are just as many borrowers who cause delays," he said "There are many things that can make the process work better. No system is perfect. Banks have raised capacity and devoted enormous resources to this." Asked if banks purposely fail to give negotiators authority to settle cases, or switch negotiators from meeting to meeting, Mongellow said banks want to resolve foreclosures.

"They try to work out modifications and restructuring. But there are always some aberrations," Mongellow said.

State Department of Banking Commissioner Howard Pitkin said the foreclosure crisis, which began as the national economy went into free fall in 2008, continues to be a significant problem in Connecticut.

"Some of that increase is due to a backlog," Pitkin said. "Is the problem getting better? It's tough to say but tweaks in mediation will make it better. The governor did a fine job on this bill."

"Mortgage foreclosures remain a big problem in Fairfield County and elsewhere across the state and we must take action to help families who are struggling to keep their homes. Governor Malloy's proposed legislation contains several promising ideas which could help to address this problem, and I look forward to reviewing the bill in greater detail when it comes before the Banks Committee," Leone said.

Leone said the bill would also require banks to fully disclose fees they charge and all information used against the homeowner.

The state Department of Banking would be able to disclose information on the number of abandoned or vacant properties, the number of occupied properties, the number of delinquent loans and the number of loans a bank owns or services.